Hess company Shareholders on Tuesday approved the upcoming acquisition of the New York-based oil company Chevron for $53 billion, although the timeline for closing the deal has become increasingly ambiguous with companies involved in a dispute with… Exxon Mobil.
A majority of Hess's outstanding shares voted in favor of the merger agreement, although the company did not immediately provide a tally of the votes. Hess stock was little changed in the news.
“We are very pleased that the majority of our shareholders recognize the compelling value of this strategic transaction and look forward to the successful completion of our merger with Chevron,” said John Hess, the company's CEO.
But the pending deal is in potential jeopardy amid Exxon's claim of a right of first refusal over Hess' assets in Guyana under a joint operating agreement governing a huge offshore oil patch called the Stabroek Block.
Hess has a 30% stake in the Stabroek Block, while Exxon is leading the development with a 45% stake. China National Offshore Oil Corporation owns the remaining 25%.
Exxon filed for arbitration in March to defend the rights it claims under the joint operating agreement. Chevron and Hess told investors that the pending deal would expire if Exxon won.
Hess said on Tuesday that completion of the deal depends on the resolution of arbitration proceedings. The two companies are working to complete the merger “as soon as possible,” according to Hess.
Before the vote, Hess shares were trading at around $152, meaning the deal margin has widened since the deal was announced. This suggests that some investors fear the agreement is in jeopardy.
Chevron has repeatedly asserted that Exxon's claims under the joint operating agreement do not apply to its acquisition of Hess.
“We are confident that our position on the right of first refusal will be upheld in arbitration and are working to strengthen the process on this immediate matter,” Bill Turin, a Chevron spokesman, said in a statement Tuesday. “We look forward to completing the transaction and welcoming Hess to our company.”
But Exxon CEO Darren Woods said his company was well-positioned to prevail in arbitration, telling CNBC in April that the oil major had written the agreement.
The Chevron-Hess deal was originally scheduled to close in the first half of 2024, but that timeline was postponed due to the Exxon factor. Chevron CEO Mike Wirth told analysts on a conference call last month that Hess had asked the arbitration court to issue a ruling in the fourth quarter, which would allow the companies to “close the deal shortly thereafter.”
Woods told CNBC in April that he expects the arbitration to last until 2025. The CEO said Exxon does not intend to make a bid for Hess. Woods said Exxon is seeking to assert its rights under the joint operating agreement and find out the value placed on Hess' assets in Guyana under the deal.
If Exxon prevails and the Chevron-Hess deal ends, Hess will remain a stand-alone company and retain its stake in the Stabroek area.
The Chevron-Hess deal also faces scrutiny from the Federal Trade Commission. Chevron expects the FTC's review to move toward its conclusion in the coming weeks, Tourigny said.
Institutional Shareholder Services called on Hess shareholders to abstain from voting on the merger agreement to allow more details to emerge about how long the arbitration process will take.
ISS said Chevron and Hess did not immediately notify shareholders of the risks posed by the joint operating agreement, and waited months after the deal was announced. Hess shareholders will bear the risk if the deal is terminated because Chevron is not obligated to pay a termination fee, according to ISS.
Shareholders will also not be entitled to Chevron's dividends during the arbitration process, according to ISS. Hess described the dividend as one of the main benefits of the merger, according to ISS.
On the other hand, Glass Lewis recommended that shareholders vote in favor of the deal. The company acknowledged that the dispute with Exxon had created uncertainty, but said that “generally, the strategic and financial advantages of the proposed merger are sound and reasonable.”
